Huawei Chief Predicts Sales Will Flatline After Trump Crackdown

By Raymond Zhong

9 - 11 minutes

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Huawei’s founder and chief executive, Ren Zhengfei, in Shenzhen, China, on Monday. The company denies American allegations that its hardware is a security threat.CreditCreditHector Retamal/Agence France-Presse — Getty Images

SHANGHAI — Huawei, the embattled Chinese technology giant, is slashing its sales expectations for this year by around $25 billion as the Trump administration’s clampdown on the firm takes a bite out of its business.

At an event on Monday at Huawei’s headquarters in Shenzhen, the company’s chief executive, Ren Zhengfei, said he expected annual revenue to come in at about $100 billion both this year and next before recovering in 2021.

Last year, Huawei took in more than $105 billion in sales, helped by its fast-growing smartphone business. Mr. Ren said in January that he predicted another bumper year in 2019, with sales jumping to $125 billion.

But that was before the United States last month cut Huawei off from the American chips, software and other parts that go into its handsets and telecommunication equipment, saying that the company represented a threat to national security. American officials have long said Beijing could use Huawei’s products to disrupt or sabotage digital communications, accusations that the company vehemently rejects.

Washington has taken its case against the Chinese giant to many of its allies overseas, leading governments around the world to reconsider whether the firm should be allowed to build next-generation 5G telecom infrastructure.

The company, one of China’s proudest corporate champions, has become a focal point in the fierce conflict that has engulfed the world’s two largest economies. Washington handed down the restrictions on American firms’ dealings with Huawei after Chinese and American negotiators failed in early May to reach an agreement to end their yearlong tariff war.

The Trump administration had already inflamed tensions with China late last year by arranging the arrest in Canada of Mr. Ren’s daughter and Huawei’s chief financial officer, Meng Wanzhou, as part of a criminal case against her and the company related to American allegations of theft of industrial secrets and violations of sanctions against Iran. Huawei has denied wrongdoing.

President Trump is expected to meet with China’s top leader, Xi Jinping, at a Group of 20 meeting in Japan this month, and clemency for Huawei could be part of a broader compromise on tariffs. But lawmakers from both parties in Washington have urged the Trump administration to keep the question of Huawei’s fate separate from the trade negotiations. They say easing back on Huawei would lead other governments to believe that American officials are not sincere in arguing that the company is a security menace.

At the event on Monday, Mr. Ren said Huawei had not expected the United States’ actions to undermine the company as severely as they had. Other Huawei executives have said the company stockpiled computer chips and electronic components in anticipation that it might one day be unable to buy them from American suppliers.

“We did make some preparations,” Mr. Ren said on Monday. “It’s like we’re on a damaged airplane. We only protected the heart. We only protected the fuel tank. We did not protect other, smaller parts.”

The company has also said it is developing its own operating system to replace Google’s Android in its handsets. But it remains to be seen whether consumers in Europe, for instance — where Huawei has become a giant smartphone seller — will want to use devices that run on unfamiliar and potentially less-tested software.

Huawei’s smartphone business outside China has already begun to suffer, Mr. Ren said on Monday. In the month since Washington announced its latest restrictions on the firm, Huawei’s overseas handset sales have cratered by two-fifths from the month before, a company spokesman said after the event.

Huawei is not publicly traded, but it releases some financial results and forecasts as a gesture toward openness.